Four entities sign agreement to create mechanism for industry's transformation
Four entities signed a framework agreement on Friday to establish China's first steel industry restructuring fund.
The fund, which may be launched in June, will seek to push forward the steel industry's restructuring and upgradation. It is expected to have 40 billion yuan ($5.88 billion) to 80 billion yuan in corpus initially.
China Baowu Steel Group's Hwabao Investment Co Ltd and US-China Green Fund will hold 25 percent each, WL Ross & Co 26 percent and China Merchants Finance Holdings Co Ltd 24 percent.
Baowu Steel is China's largest steel-maker and the world's second-largest by crude steel output.
According to Ma Guoqiang, Baowu Steel's chairman, the fund is tasked to help the Chinese steel industry to eliminate excess capacity, speed up restructuring, raise industry concentration and promote international cooperation.
Ma Weihua, former president and CEO of China Merchants Bank, is tipped to chair the joint venture that will run the fund.
"The restructuring of the steel sector will be of great aid to the Chinese economy. It is a great mission containing huge business opportunities. I know the journey to success will be full of obstacles, but along with the four great partners, I will pour all my energy into the new career," Ma said at a media conference.
"Each of the four partners is irreplaceable. Each will play a unique role by combining both domestic and international resources," said Zhou Zhuping, chairman of Hwabao Investment Co Ltd.
According to Zhou, the industrial concentration rate of China is much lower than that of South Korea, Japan and Russia. China's steel industry cut its capacity by 65 million metric tons last year, and needs to cut 50 million tons more this year.
Last October, a report by the Ministry of Industry and Information Technology outlined the steel industry's restructuring and upgrading tasks for the next five years.
It requires steel-makers to cut their crude steel capacity by 100 million tons to 150 million tons.
According to the MIIT plan, during the 13th Five-Year Plan period (2016-20), the country's top 10 steel enterprises should raise their output from 34 percent of the nation's total to 60 percent.
Later in December, the Central Economic Work Conference called for mergers and restructuring across the steel industry.